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Pension Tax Hits Michigan Seniors

Jeff Badman opted for early retirement from his job as an auto industry engineer after 29 years. The 57-year-old Huntington Woods man receives a private pension that would be subject to the full impact of a new tax that is part of a compromise forged by Gov. Rick Snyder and legislative leaders.

See Also: Pension Tax Unfair If Business Gets a Break

Badman is among taxpayers born after 1952 who would no longer receive an exemption for retirement income. In another decade, when he reaches age 67, he would choose from a different menu of new tax options. When he decided to retire, no such tax was even contemplated.

“I have tabulated the cost to me and it will be significant as a percentage of my total income,” Badman said. “The proposal has an intermediate and long-term effect on my ability to live in this state and disrupts the assumptions I made to retire. If this law is enacted I plan to move out of this state within a year.”

Badman is not alone. Thousands of Michiganders would be in the same boat. The average autoworker, who receives an annual pension of $32,000 after 30 years on the job, would have to pay $1,400 a year in unanticipated tax.

Terry Anserello, a retired school psychologist also in his 50s, says he’s “very upset that Michigan is poised to go from a state that has encouraged retirees to live and stay to a state that so taxes our income as to encourage people to not come or to leave.”

Anserello, of St. Joseph, has an answer for those who say it’s time for seniors to pay their fair share.

“Besides the taxes we paid while working, pensioners continue to pay property taxes and sales taxes,” he said. “Our purchase of goods and services help grow our local economies. The heavy tax that is proposed will not only limit our purchasing power, but will negatively impact the businesses where we live.”

The bill that sets up a three-tiered pension tax system is now being considered in the state Senate. Action could come this month (May). The plan puts in place varying pension tax liability for those under 60, ages 60 to 66 and 67 and older. The Homestead Property Tax Credit many seniors rely on to stay in their homes also would be greatly reduced, and the $2,300 special state income tax exemption for seniors would be eliminated.

Carl Achambeau of Grand Ledge is 75, so his pension would continue to be exempt from state income tax under the compromise plan. But he still strongly opposes the bill.

“We are not all that concerned about ourselves, but for our children and grandchildren,” he said. “Our sons and daughter are saying they will have to work until the day they die because of taxes, health care costs, the attack on Social Security, and other factors. This is not the type of country we have supported all these years.”